How state policies change cooling decisions across India’s data centre hubs

Author: Sumati Sahgal, VP, Data Centre & Secure Power

A data centre operator planning capacity in Mumbai cannot assume the same cooling economics will apply in Chennai, Hyderabad, Bengaluru, or Noida. India’s data centre incentives are largely set at the state level, where electricity concessions and water provisions vary. At the same time, several of the country’s largest data centre hubs face significant water stress.

For data centre providers and those designing their facilities, data centre policy in India is a key input to cooling design. Operators should consider how state power incentives, physical water availability, and rising rack densities affect a facility’s cooling economics. The cooling architecture must remain practical as resource conditions and computing requirements evolve.

State incentives don’t eliminate water constraints

Data centre operators today face varying power and water conditions from state to state. When data centre policy incentives are compared with the physical conditions of India’s largest data centre hubs, the differences matter most.

Maharashtra: favourable power terms do not eliminate water risk

Maharashtra offers a permanent exemption from electricity duty for data centres and a power tariff subsidy (subject to location, investment scale, and time limits). Maharashtra Industrial Development Corporation areas also receive commitments to uninterrupted water supply, while data centres are encouraged to recycle water. Favourable electricity economics can strengthen a project’s business case without diminishing the value of reducing dependence on water-intensive cooling.

Tamil Nadu: policy incentives meet physical water constraints

Tamil Nadu’s 2021 policy offered a five-year electricity tax waiver and reduced open access charges, but did not address water. Chennai, meanwhile, is classified as water-stressed and experienced a severe water crisis in 2019. That contrast illustrates that policy availability and physical availability are not the same.

For operators, consultants, and specifiers, a commitment to water availability should not be taken as proof of long-term water security. Cooling requirements must be evaluated against both India’s data centre policy and the site’s resources.

How do water and power policies influence liquid cooling decisions?

Liquid cooling decisions are often framed by rack density: as IT loads become harder to cool efficiently with air alone, liquid cooling becomes more attractive. In India’s data centre market, water dependency and long-term power economics must also be considered.

Reduce dependence on evaporative water

Traditional evaporative cooling rejects heat by evaporating water, resulting in continuous water loss. Closed-loop direct-to-chip liquid cooling can substantially reduce dependence on evaporative water, reducing exposure to a resource whose future availability may be uncertain.

However, liquid cooling does not automatically make a data centre water-free. Heat captured still has to be transferred through the thermal system and rejected. Facility architecture, chillers, heat-rejection equipment, and climate all influence the resulting water profile. That is why the complete thermal path must be designed with all of these factors in mind.

Model power costs beyond the incentive period

Electricity incentives should also be evaluated over the facility’s lifecycle. A five-year tariff or tax concession can improve early operating economics without compromising cooling efficiency once that benefit expires.

For facilities expected to support changing customer densities over years, the Total Cost of Ownership (TCO) model should consider cooling performance under both current incentives and post-incentive electricity costs. The decision-making framework should evaluate rack density, cooling energy, water dependency, and local infrastructure conditions together.

Design the cooling chain around site conditions

Facilities will need to accommodate substantially denser racks over time, making liquid cooling less a matter of selecting a single product and more a matter of designing the complete thermal path.

In direct-to-chip architectures, accessories capture heat at high-power components. Coolant Distribution Units (CDUs) transfer heat between the technology and facility cooling loops, while Chillers and Heat Rejection determine how that heat leaves the data centre. Rear-door heat exchangers (RDHx) can support hybrid environments where air and liquid cooling need to coexist.

For data centre providers serving changing customer requirements, a hybrid cooling architecture’s flexibility can be essential. Some facilities may move exclusively toward direct-to-chip liquid cooling, while others may require a mixed architecture that supports both conventional and high-density racks. Prefabricated modular IT pods can also provide a repeatable approach to capacity expansion while integrating liquid cooling into broader electrical and facility infrastructure. With Schneider Electric, you can build a comprehensive, end-to-end cooling approach.

For operators and their design partners, the ideal architecture combines rack cooling, coolant distribution, facility cooling, and heat rejection in a way that best fits the site’s power, water, density roadmap, and operating model.

A cooling-policy checklist for data centre projects in India

Before freezing a cooling specification, test the design against six questions.

• Power: Which electricity incentives apply, how long do they last, and what happens to cooling TCO when they expire?
• Water: Does the design depend on potable, treated, recycled, or another water source?
• Water risk: How does the policy commitment compare with actual local water stress?
• Density: What rack densities must the facility support today, and what could customers require later?
• Flexibility: Can air cooling, rear-door heat exchangers, and direct-to-chip liquid cooling coexist as requirements change?
• Thermal path: Have facility-water loops, heat rejection, and electrical infrastructure been designed together?

A cooling specification developed for one state should not automatically become the template for another. Similar IT requirements can exist within very different power, water, and data centre policy conditions in India.

Cooling strategy should follow the realities of the site

Data centre policy in India should influence not only where data centre providers build, but how they cool what they build. Electricity incentives affect operating economics, while water availability and rising rack densities influence whether that cooling strategy remains practical over time.

The strongest approach is to evaluate power, water, density, and heat rejection as a single infrastructure decision rather than optimising each independently. Schneider Electric’s comprehensive liquid cooling portfolio supports that system-level approach. Explore our end-to-end liquid cooling solutions to assess how your site’s power, water, and density requirements should shape its cooling architecture. For a closer look at how to select and design the right system for your facility, download the Liquid Cooling System Architecture Guide.